23777 gb forbo in e 21.3.2000 9:06 uhr seite 1 · profit, taking it to a total ofchf 86.1 million...

Annual Report 1 9 9 9

Fo

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An

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al

Re

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99

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In the development and manufacture of its products Forbofocuses on the needs and wishes of its customers and end-users.The diversity of these needs is matched only by the uniqueness of the solutions Forbo provides – products that are designed to meet a broad range of exacting requirements in a variety ofsectors around the world. The pictures in this Annual Reportshow just some of the ways in which Forbo products are used,giving the reader a brief but representative impression of thebroad spectrum of products the company offers.

With the modern Novilon® floorcovering there are almost nolimits to individual choice. In the kitchen-cum-living area of a new single-family home in Frankfurt am Main Novilux®

marquetry borders add a special note.

Amsterdam’s former planetarium today serves as a conferencecenter and meeting place for architects. It was designed by thearchitects Van den Oever, Zaaijer, Roodbeen & Partners. P. Zeegerswas responsible for the original design of the Linoleum floor using Artoleum® Scala.

Siegling’s Transilon® conveyor belts transport the luggage atHong Kong’s new Chek Lap Kok airport where they demonstratethe robustness and hardwearing qualities for which they arerenowned.

Marmoleum® Real was used for the floor of the sports centerPabellon Deportivo Colegio Manuel Peleteiro in Santiago deCompostela in Spain – an ideal and attractive choice.

The wooden elements of the new bridge in the Sihltal valley near Zurich, Switzerland, were glued together with Forbo CTU’s weatherproof polyurethane wood adhesive Balcaton®.

At the Lance factory in Charlotte (USA) Transilon® conveyor beltsby Siegling are used for the processing and packaging of cookiesand crackers.

Forbo Creates Value for Customers

Page 8

4

Page 18

Page 22

Page 28

Page 32

The original language version of this Annual Report is German.

ImprintConcept/Editing: Rubeli Häusermann Public Relations, ZurichDesign: Gottschalk+Ash Int’lPhotography: Daniel Gerber, ZurichTypesetting/Lithography/Printing: Neidhart + Schön AG, Zurich

March 2000

23777_GB_Forbo_UG_E 21.3.2000 9:03 Uhr Seite 1

Contents

Forbo

Key Figures

Report of the Chairman of the Board of Directors

Report of the Chief Executive Officer

Forbo Group: Promising Business Performance

Flooring: Market Position Strengthened

Industry Specialties: Products that Set Standards

Shaping the Future

Formula for Success: Highly Committed People

The Forbo Share

Corporate Bodies and Management Structure

Organizational Structure

Addresses

Forbo Financial Report

2

3

4

6

10

16

20

24

26

30

34

35

36

Enclosure

23777_gb_Forbo_IN_E 21.3.2000 9:06 Uhr Seite 1

2 Forbo Annual Report 1999

Forbo

Forbo is an internationally active industrial company which has grown steadi-ly since it was established in 1928. The Group now operates 30 manufacturingcompanies in 12 countries and 73 marketing organizations in 25 countries.The Head Office is located in Eglisau/Zurich (Switzerland).

The Group develops, produces and markets products and systems in its twoDivisions, Flooring and Industry Specialties, each of which is made up ofseveral business units. These business units are focused on specific productgroups and carry responsibility for sales and income. The various businessunits are linked by numerous synergies.

Forbo has an excellent store of product, manufacturing and market expertisewhich it employs to the full in order to exploit existing synergy potential,innovative thrust and to selectively expand its market activities.

Thanks to the Group’s attractive product portfolio and brand names that arewell-established worldwide, Forbo occupies leading positions in its chosenmarkets.

Forbo’s goal is to achieve a sustained increase in shareholder value by focusingon profitable core products, through organic growth and acquisitions and bysystematically gearing its activities to market requirements.

The Forbo Group has approximately 7,000 employees worldwide.



Key Figures1)

Forbo Group

Gross sales

Change on previous year (%)

Flooring

Industry Specialties

Net sales

Operating profit before specific provisions


As % of net sales

Operating profit after specific provisions

Cash flow


As % of net sales

Consolidated profit before specific provisions


As % of net sales

As % of average shareholders’ equity

Consolidated profit

Capital investment, net

As % of cash flow

Total assets

Shareholders’ equity

Equity ratio (%)

Employees (at 31.12.)

Economic value added (EVA®)3)

Stock market capitalization (at 31.12.)

Per share data

Earnings per share4)

Shareholders’ equity per share

Dividend per share

Payout ratio4) (%)

1999

m EUR

1,169.8

679.2

490.6

1,095.0

76.8

33.1

119.6

53.7

10.0

74.5

1,078.1

496.0

1998

m CHF

1,832.2

–9.7

1,066.0

766.2

1,714.5

112.2

+16.5

6.5

112.2

178.0

+1.4

10.4

76.7

+23.5

4.5

9.8

76.7

148.4

83.4

1,580.3

798.3

50.5

1999

m CHF

1,874.4

+2.3

1,088.3

786.1

1,754.5

123.0

+9.6

7.0

53.0

191.6

+7.6

10.9

86.1

+12.3

4.9

10.8

16.1

119.4

62.3

1,727.4

794.8

46.0

m EUR

11.5

689.7

m CHF

10.1

884.0

m CHF

18.5

1,105.1

EUR

36.47

336.66

13.73

CHF

52.06

541.805) 22.00

42.3

CHF

58.44

539.43

22.00

37.6

Number

6,781Number

6,829

1)For explanatory notes, see Financial Report 2)CHF values translated at year-average exchange rate of CHF 1.6023/1 EUR (Bloomberg)3)Registered trademark of Stern, Stewart & Co.4)relating to consolidated profit before specific provisions5)Proposal of the Board of Directors

2)

2)

2)



Report of the Chairman of the Board of Directors

Ladies and Gentlemen,

following the 1999 General Meeting of Shareholders the Board of Directorsreconstituted itself, replacing the previous Board Committee with three newones: an Audit and Finance Committee, a Corporate Development Committeeand a Committee for Human Resources and Remuneration. This reorganiza-tion ensures that the work of the Board of Directors is dealt with efficiently.As previously announced, we conducted a thorough review of our company’soverall business strategy in the year under review. This process resulted in theformulation and adoption of a new strategy, whose overarching objective is tobring about a sustained enhancement of enterprise value. In the next fewpages Werner Kummer, CEO, gives an in-depth report on the Group’s strategicrenewal.

Well-Equipped for the Future

The results for the 1999 business year tell a clear story: we are approaching thefuture with greater strength. On sales of CHF 1,874.4 million, 2.3% up on the previous year, we achieved an impressive 12.3 % increase in consolidatedprofit, taking it to a total of CHF 86.1 million (before specific provisions forthe strategic reorganization amounting to CHF 70 million after tax). Therestructuring measures introduced in previous years and the Group’s efforts to keep costs under control made an important contribution towards thispositive result. In addition, we can safely say that our product portfolio is well-positioned in our major markets, finding strong and widespread acceptance in the face of stiff competition. Forbo is well-equipped to vigorously pursuenew and ambitious objectives.

Net profit for 1999 reported by Forbo Holding SA totalled CHF 33.5 million(previous year: CHF 33.0 million). In the light of this result the Board ofDirectors proposes that the General Meeting of Shareholders approve paymentof a dividend of CHF 22 per registered share, unchanged from the previousyear. The total dividend distribution thus amounts to CHF 32.4 million (previ-ous year: CHF 32.4 million), with the number of shares in circulation remain-ing the same as in the previous year.

Personnel Changes

The term of office of Dr. Ivo Gerster will expire with effect from the date of theforthcoming Annual General Meeting of Shareholders. Dr. Ivo Gerster is standingfor re-election for a one-year term of office, at the end of which he will havereached the age limit according to organizational regulations. The Annual GeneralMeeting will also be asked to elect Michael Pieper, Hergiswil, for a term of office of four years.

In parallel with the formulation of Forbo’s strategic renewal, the Group’smanagement structure was reorganized with effect from January 1, 2000. Thecompany’s core business is now divided into four Strategic Business Units:Linoleum, Cushion Vinyls, Belting and Adhesives. Each of these units is underthe responsibility of one of the members of the Group Executive Board.

Impressive increasein earnings

Unchangeddividend

Board of Directors

Group ExecutiveManagement



This made it necessary to expand the Group Executive Board from five toseven members with the appointment of Marien A. G. Weijenberg and Dr. JanLipton. Marien A. G. Weijenberg has been with Forbo Krommenie B.V. inHolland for the past four years, where he was in charge of production. He nowassumes responsibility for the Linoleum business unit with effect from January 1, 2000. Dr. Jan Lipton, formerly a Member of the Group ExecutiveBoard of the Laufen Group, with responsibility for sanitary ware products in Europe/Asia, ceramic tiles business in the USA and technology and innova-tion, will become head of the Belting business unit as of April 1, 2000.

Well Set to Tackle the Changes

All the prerequisites for the process of change initiated by the Group’s strategicrenewal are in place. We command outstanding product and market exper-tise. We can count on business units whose performance capabilities comparefavourably with our competitors. And we aim to build on these strengths.Our focused approach will enable us to deploy our human and financial re-sources efficiently and effectively. The changes that lie ahead are a great challenge for all our managers and staff.

Profit-Driven Growth

Our aim is to consolidate and further reinforce our leading positions in themost attractive markets. We will be striving not just for strong profitability butalso for sales growth, since the two need to be successfully combined if enter-prise value is to be enhanced. This will require dynamic, profit-driven manage-ment of the Group’s product portfolio, a process for which all the necessaryprerequisites have now been created.

Forbo on the Move

We can look back on a good business year and I would like to express oursincerest gratitude to everyone in the organization for their impressive com-mitment, for all the hard work they have put in and for the results they haveachieved. I would also like to thank our customers for choosing the productsand services we offer. And of course we also owe a debt of gratitude to ourshareholders for the confidence they have shown in us through their invest-ment in the company. Our Group is now moving forward. With the strategicreview we have plotted a new course, to which all our activities will be har-nessed. I am entirely confident that we will achieve the objectives we have setourselves.

Karl Janjöri

Concentrating onour strengths

Dynamic manage-ment of the productportfolio

A word of thanks

Karl JanjöriChairman of theBoard of Directors



Report of the Chief Executive Officer

Building on our Strengths – Creating Shareholder Value

In the year under review we succeeded in further improving our operationalprofitability. In a world of rapid change we aim to build on this strength tocreate a corporate entity that is constantly evolving with dynamism and flexi-bility. Technological advances have generated scope for innovation. Global-ization is providing access to new markets. Mounting competitive pressurescall for adaptability. Our task is to engage in an unrelenting and intensivesearch for appropriate and effective responses to these challenges. In the yearunder review we have conducted a thorough analysis of the Group and itsmarkets and, based on the results of this analysis, have plotted a course for thefuture. The new approach is based on four principles.

The Four Cornerstones of Forbo’s Future Strategy

Forbo will focus more intensely than before on its core businesses which offerstrong and sustained potential for strong profitability, sales growth, marketleadership and synergies. The sectors that we have designated as Strategic Busi-ness Units are Linoleum and Cushion Vinyls in the Flooring Division, Belting(conveyor and drive belts made from synthetic materials) and Adhesives in theIndustry Specialties Division. The future role to be played by the other busi-ness units will depend on whether they strengthen our strategic core businessor show the necessary potential for development into autonomous StrategicBusiness Units in their own right.

All Strategic Business Units must secure leading positions either worldwide orin their most important markets. This can be achieved by organic growth andthrough well-targeted acquisitions. At the same time we will focus on achiev-ing earnings-driven growth. Capital investments will be channelled into areaswith strong and clearly identifiable earnings potential. Accordingly, everybusiness unit must measure itself in terms of performance against its externalcompetitors in the marketplace as well as against the other units within theGroup.

Our most important assets are satisfied customers and employees with strongcapabilities and motivation. To achieve the former we must systematically gearour market performance to the needs of our customers, ensuring their com-plete satisfaction through the unrivalled quality of our products and of theassociated services. And, in this, the all-important factor will be our managersand staff, whose dedication and commitment, sense of responsibility andability to act on their own initiative will play a key role in moulding the cus-tomer’s perception of the company. And, for our part, we aim to do everythingin our power to ensure that all our employees can work as successfully andeffectively as possible, by providing for a corporate culture, which is open,straightforward and performance-oriented, and which recognizes the impor-tance of training, career development and performance-driven remunerationsystems.

Our business

Our goals

Our assets



Our mission Our mission is to achieve a sustained increase in enterprise value, for whichthe best guarantee is a combination of strong earnings power and growth. Ourbusiness strategy is closely and consistently geared to the creation of value.Each and every operational unit must satisfy this requirement. At the sametime, this strategy is the main criterion for the future allocation of human andfinancial resources. The objective of systematically enhancing the value of ourcompany is an important underlying factor in all our planning and decision-making processes, as well as providing the key parameters for performanceassessment. A vital task for Forbo is to ensure that employees at all levels dis-play the necessary understanding of and commitment to the process of changein which we find ourselves, so that they may play a part in actively shaping thisprocess.

Target

Our objective is to achieve a sustained increase in earnings and sales. TheGroup’s mid-term target is to raise the return on sales before depreciation(EBDIT as percentage of net sales) from today’s level of 13% to 16% and toincrease the return on assets (EBIT as percentage of operating assets) fromtoday’s figure of 8% to 15%. Over the same period we will seek to achieve asignificant increase in sales by means of internal growth and carefully tar-geted acquisitions.By drawing on the combined resources of all Forbo employees we believe wecan rise to the challenge of securing a successful future for the Group.

Ambitious yetrealistic

Werner KummerPresident and ChiefExecutive Officer



W e c r e a t e a t m o s p h e r e .



Forbo Group:Promising Business Performance

In the 1999 business year Forbo’s total sales rose by 2.3% to

CHF 1,874.4 million. This increase was attributable to both the

Flooring and Industry Specialties Divisions in equal measure.

Considerable growth was achieved in Asia, North and South

America, regions of increasing importance for the Group.

Promising sales growth was recorded in the core products

linoleum, belting and adhesives.

Successful Performances in our Core Businesses

In the flooring business, sales of the core product linoleum expanded to ac-count for a 40.7% share of the total. Forbo is the world leader in this area,with a market share of around 60%. In 1999 the Group’s linoleum sales grewby 4.0% to CHF 443.1 million, helped by new collections, which were success-fully introduced in a number of markets. The market for cushion vinyl floorcoverings is suffering from overcapacities and price erosion. Even so, thanks tohighly effective marketing aimed at selected customer segments the Groupposted sales of CHF 370.7 million, a mere 1.2% below the previous year’s figure.

The two core products of the Industry Specialties Division, belting (conveyorand drive belts) and adhesives, put in a positive performance. Sales of beltingproducts were up 8.0% to CHF 339.5 million. The introduction of new productsand the expansion into attractive new segments enabled us to further rein-force our leading market position. Our Adhesives Business benefited fromrising demand in its major markets, with the result that sales were up 6.9% to CHF 223.7 million.

Number one inlinoleum

Strengtheningmarket position

Sales by businessm CHF

1999

1,088.3

786.1

Change98/99 %

2.1

2.6

%

58.1

41.9Flooring




Europe remains theprincipal market

Consolidation

Vigorous Growth in USA and Asia

The Group’s business in Asia recovered from last year’s downswing, enablingsales to soar by 23.5%. This was due in part to the new belting manufacturingcompany in China. Sales in North and South America were boosted by 8.2%.The healthy state of the US economy led to a marked increase in sales, espe-cially in the belting area. Nevertheless, Europe continues to account for morethan 80% of group sales. In the important market regions of Benelux andScandinavia Forbo registered slightly above-average sales growth rates. In theUnited Kingdom, France and Germany sales were slightly down on theprevious year, more heavily so in Eastern Europe.

Capital Investments

Following the heavy investments effected in the period 1997/98 in large-scaleproduction facilities in the Netherlands, Germany and the United Kingdom,the Group’s capital spending was at a much lower level in the year underreview, all investment projects combined amounting to CHF 125 million. Thisfigure includes the sum of CHF 37 million relating to projects from previousyears, which affected liquidity in 1999.Our budgeted investment spending for the current business year is approxi-mately CHF 100 million and will be focused on the Strategic Business Units.

Sales by geographic area

Benelux

Germany

America

Scandinavia

France

United Kingdom

Asia/Africa

Switzerland

Southern Europe

Eastern Europe0 50 100 150 200 250 300 350 400

m CHF1999

372.8

358.2

198.6

184.8

175.0

170.1

133.0

124.6

112.8

44.5

Change98/99 %

3.6

–0.9

8.2

3.2

–1.0

–3.6

22.2

1.5

0.5

–12.9

%

19.9

19.1

10.6

9.9

9.3

9.1

7.1

6.6

6.0

2.4



Staff

At the end of 1999, Forbo had 6,829 employees worldwide, representing anincrease of 0.7 % on the previous year (6,781). This rise is largely attributableto the expansion of operations in China and the growth achieved in the USA.The strategic renewal process may bring a reduction in the headcount by up to 200 jobs in 2000, mainly in the Carpets and Belting Business Units wherestructural adjustments are required. At the same time, however, the plannedexpansions in other areas will create new jobs.

Earnings

Following a somewhat weak performance in the first half of 1999, businesspicked up in the latter half of the year under review and, in particular, in thefourth quarter. Thanks to this upturn and consistent efforts to cut costs, to-gether with a greater emphasis on our more profitable core products, theGroup’s operating profit grew at a faster rate than its sales. At CHF 5.6 million,(net) financial expenses were by CHF 2.2 million below the previous year’slevel, due to higher financial income and lower interest cost. Consolidatedprofit rose by 12.3% to CHF 86.1 million on a comparable basis to the previ-ous year. As part of the strategic renewal initiative, specific provisions forrestructuring and valuation adjustments were created, e.g. for the Carpets andBelting Business Units, where structural adjustments are being carried out.To this end the sum of CHF 70 million after tax was charged to consolidatedprofit for 1999. Details on how these funds are to be applied will be given once they have been allocated and used. After deduction of these specific pro-visions consolidated profit amounted to CHF 16.1 million.The improvement in group operating profitability in 1999 is also demonstrat-ed by the increase in the return on assets (operating profit as a percentage of operating assets) to 8.2% and in particular by the Group’s economic valueadded. This is expressed on an EVA® basis as the excess over the weightedaverage cost of capital. EVA® increased in 1999 by CHF 8.4 million (83.2%) to CHF 18.5 million.Through the targeted deployment of funds we succeeded in increasing the freecash flow from a negative amount of 20.0 million in 1998 to CHF 35.3 million.This positive development is also visible in the balance sheet where net finan-cial liabilities were down by CHF 39.6 million to 205.1 million.

Above-averageprofit growth

Structuraladjustments



Outlook

We expect to see a continuation of the revival in business activity in our mainmarkets that set in towards the end of 1999. This, together with the strategicmeasures designed to focus our operations more sharply, to gear our activitiesmore closely to the market and to promote growth in our core businesses,means that we should already move a step closer in the current year to achiev-ing our mid-term objectives.

On course

Free Cash Flow 1999

–25 0 25 50 75 100 125 150 175 200

m CHF

187

–120

–32

35

Free Cash Flow 1998

–25 0 25 50 75 100 125 150 175 200

m CHF

155

–147

–28

–20

Cash flow from operating activities

Cash flow from investing activities

Dividend paid

Free cash flow

Cash flow from operating activities

Cash flow from investing activities

Dividend paid

Free cash flow

See Consolidated Cash Flow Statement in the Financial Report, page 4



W e l e n d e l e g a n c e a n d h a r m o n y .



In 1999, Forbo strengthened its position in the flooring market.

Despite stagnating volumes and falling prices in important mar-

kets, the Group’s considerable marketing efforts enabled it to

increase sales by 2.1% to CHF 1,088.3 million and operating prof-

it (EBIT) to CHF 103.5 million (previous year: CHF 97.1 million).

Linoleum

With a market share of more than 60%, Forbo is the world’s leading supplierof linoleum, one of the Group’s core products. Total sales in the year underreview amounted to CHF 443.1 million, 4.0% up on the previous year. Oursubstantial marketing efforts were one major factor behind this encouragingresult. The new Artoleum® 2 design collection launched in 1999 met with avery positive response on the market. And the Forbo collections attracted greatattention at Europe’s leading trade fairs, Domotex in Hanover and Bâtimat inParis.A very promising performance was recorded by our activities in North America,where linoleum, still commanding a relatively small share of the market, isnow achieving greater acceptance. The Forbo range is excellently positioned in this market: in early January it was ranked number one by the Design Jour-nal, and Artoleum® received the highly prestigious 1999 Platinum Award for Design Excellence in the flooring category. In the USA Forbo has a highlyeffective sales and marketing team. The two existing training centres forflooring techniques will be supplemented by a third one to be opened this year.To mark its 100th anniversary, the Dutch company Forbo Krommenie B. V.organized an exhibition of linoleum art prints in the Cobra Museum inAmstelveen, Netherlands. The exhibition, entitled ‘From Kandinsky to Corneille’,enjoyed public and critical acclaim.

Cushion Vinyls

Like the previous year, 1999 was characterized by difficult market conditions.The problem of excess capacities was aggravated further. Despite these condi-tions Forbo succeeded in maintaining its positions in the major Europeanmarkets. Thanks to its extraordinary design and the excellent benefits it offers,the inlay chips technology of Forbo Novilon® made further headway in termsof market popularity. Total sales of cushion vinyl floor coverings in 1999 stoodat CHF 370.7 million, 1.2% below the previous year, which is substantially lessthan the decrease of the total market.

Successfulmarketing drive

Success in spite of difficult marketconditions

Flooring: Market Position Strengthened



At Forbo Novilon produktiebedrijven bv in Coevorden (Netherlands) the firstphase of a new production line was brought on stream. In the current businessyear the second phase of the new plant will be completed. This will give Forbothe necessary production technology to manufacture innovative cushionvinyls, which will be ready for market launch in the next few months. ForboSarlino SA in Reims (France) vigorously expanded its market position in vinylfloor coverings that offer strong sound insulation characteristics. In Colorex®

Shape, Forbo Giubiasco SA (Switzerland) has developed a new generation ofhalogen-free vinyl floor coverings for special applications.

Carpets

Although the market for textile flooring continued to contract, Forbo achieved a slight growth in sales, raising it by 1.7% from the previous year toCHF 237.2 million. The business performance in this segment was helped by investments in new collections and rationalization measures.According to plan, we completed the closure of the needlefelt productionfacility in Lachen (Switzerland) and the transfer of production to Reims(France) and Wermelskirchen (Germany) together with the concentration ofall Swiss-based textile floorcovering operations in Ennenda (Switzerland).In the current business year we plan to carry out a restructuring of our Euro-pean carpet operations. To that end the Carpets Business Unit was reorganized.

Parquet Flooring

The Group’s sole remaining parquet flooring factory, located in Sweden,successfully boosted its sales to CHF 37.3 million, due to the extraordinarilyhigh-quality design of the ready-to-lay parquet flooring produced there.In the Group’s new management structure this local parquet business will beassigned to the Linoleum Strategic Business Unit. Its main function is tostrengthen the Group’s market position in Scandinavia.

Forbo does well indeclining market

Gratifying rise in sales

Sales by product group

m CHF1999

443.1

370.7

237.2

37.3

Change98/99 %

4.0

–1.2

1.7

18.4

%

40.7

34.1

21.8

3.4

Linoleum

Cushion Vinyls

Carpets

Parquet Flooring



W e k e e p t h e w o r l d i n m o t i o n .



Industry Specialties: Products that Set Standards

Forbo’s Industry Specialties division raised its sales by 2.6% to

CHF 786.1 million. Above average growth in sales was achieved

in both core products: belting and adhesives. Operating profit

(EBIT) came to CHF 44.5 million and was higher than in the previ-

ous year (CHF 35.7 million) by 24.6%.

Belting

Belting as a core product comprises conveyor and processing belts, drive andmachine belts and is produced by the Siegling group. In the year under reviewsales generated by belting products increased – in spite of heavy pressure onprices – by 8.0% to CHF 339.5 million. The recovery of Europe’s mechanicalengineering industry made it possible to expand business volume in thissegment. Siegling’s American operation took advantage of the buoyant state ofthe US economy to strengthen its market presence. In the year under reviewSiegling succeeded in winning the largest order in its history for conveyor beltsto equip a new package-handling center in the USA. The Siegling Group alsoachieved higher sales in the Far East, and especially in Japan where the econo-my saw a slight improvement. The Group’s Chinese business partner is set to sell Forbo its 20% minority stake in Forbo Siegling (Shenyang), therebyenabling the company to be converted into a wholly-owned Forbo subsidiaryin January 2000.In the 1999 business year, Siegling as leader in industry developed newproducts, which will allow the company to further expand sales in selectedmarket segments. These products include, amongst others, a new range ofdrive and machine belts for the textile and paper industries and new process-ing belts for the textile printing industry.The large-scale investment in the new production plant in Hanover (Germany)was completed in the year under review. Further funds were invested inrenewing and extending the drive and machine belts production facilities atSiegling (Schweiz) SA in Wallbach.To counter falling prices in the belting markets, operations in the year 2000will aim to reduce costs in targeted areas.

Adhesives

In the adhesives segment Forbo stayed on its positive course in the year underreview, achieving total sales of CHF 223.7 million and thereby outstripping the previous year’s result by 6.9%. The increase in demand stems from the con-struction and industrial sectors. In the Far East sales were considerably higher,whilst brisk sales growth was also registered in Germany, the Netherlands and France. By contrast, in Eastern Europe sales were down, as a consequenceof the general state of the region’s economy. Sales of Forbo hot-melt adhesivesfor industrial applications recorded above-average growth.

Largest order ever

Flourishing growth



Forbo managed to make very good progress in the flooring segment, mainlythanks to its systematic customer training in floor laying techniques and its new, environmentally friendly product range. An innovative welding rodrange was launched for the Artoleum® product line. At Eurocol B.V. inWormerveer (Netherlands), the new development and training center came on stream.In 1999, Forbo set up a distribution company by way of expanding the Group’spresence in Poland. The German distribution company Forbo Uli-ChemieGmbH was integrated into Forbo Erfurt GmbH at the end of 1999.

Coated Textiles

The internationally active group company Forbo Stamoid SA, based inEglisau/Zurich (Switzerland), was able to maintain its market position in itsmost important customer segments and, in particular, made significantprogress with products for the construction industry and outdoor advertising.Nevertheless, sales for the year were 7.1% down at CHF 43.1 million, primarilyowing to a sharp drop in orders in the military sector.

Extruded Profiles

The market for window profiles, in which we attained total sales of CHF

32.8 million, continued to be characterized by subdued demand in Germany,Europe’s largest market. The decrease in sales in Germany was made up bysuccessful sales in Eastern Europe. In 2000 we expect to see a slight recovery inthe German market and a further expansion of business in other countries.

Decorative Films and Wallcoverings

Business in decorative films for industrial applications continued to expand in1999 as it has done in recent years, whereas the products in the consumergoods sector, including wallcoverings, were impacted by difficult market con-ditions. The measures taken in 1998 to restructure the Group’s wallcoveringsoperations and the ongoing drive to rationalize the product range helped to improve profitability, although the progress was not as pronounced as ex-pected. Not only because of these measures, total sales decreased by 10.1% to CHF 147.0 million. The new production facilities came on stream at the end of 1999, thereby removing the capacity bottlenecks afflicting business withindustrial customers and paving the way for the development of new products.

Downturn in sales

Subdued demand

Sales by product group

m CHF1999

339.5

223.7

43.1

32.8

147.0

Change98/99 %

8.0

6.9

–7.1

0.6

–10.1

%

43.2

28.4

5.5

4.2

18.7

Belting

Adhesives

Coated Textiles

Extruded Profiles

Decorative Films/Wallcoverings

Strong industrialdemand



W e s e t t h e p a c e .



Shaping the Future

Forbo pursues a systematic and carefully targeted investment

strategy to expand and further develop its existing product

range. To provide further encouragement for innovation, a new

body is being set up at group level. The Forbo Group attaches

great importance to quality assurance, quality enhancement and

environmental compatibility. Forbo’s belief in the importance of

treating natural resources in an ecologically responsible manner

is reflected in its environmental management system.

Innovation and Product Development

In the 1999 business year, the Group continued to work intensively on thedevelopment projects currently in progress such as the manufacture ofthe world’s first 4.5 meter-wide conveyor belts, further expansion of the high-quality linoleum collection Artoleum® and the preparation of new collectionsfor its Carpets and Cushion Vinyls Business Units (Novilon®). At present thetop priority projects include a new kind of halogen-free vinyl floorcoveringand new adhesives for demanding applications such as wood composite con-structions.Our declared objective for the next few years is to devote greater time andenergy to devising and developing new products and market services and tomake the necessary funds available. We also intend to force the pace on new e-commerce applications and more generally on state-of-the-art IT solutionswith which we can support our more traditional business processes. At grouplevel a newly constituted committee will devote itself to identifying scope for,initiating and controlling group-wide innovation projects. Forbo’s projectwork is to be carried out increasingly by cross-unit teams and through inter-disciplinary networks of employees. The range of products offered in our corebusinesses is to be expanded at a faster innovative pace, with the objective ofsetting new market standards and consolidating our leading market positions.This will also include the provision of customer-oriented services, such astraining programs, information documents and user instructions.

Attractivedevelopmentprojects



Investing in newproduct generations

Investments

In the year under review the large-scale investment projects initiated inprevious years were brought to completion. These include the new state-of-the-art production plant at Forbo Novilon produktiebedrijven bv in Coevorden(Netherlands), the world’s first production unit for manufacturing belting pro-ducts up to 4.5 meters wide, installed at Siegling GmbH, Hanover (Germany),and the cast film line and gravure printer at Forbo CP Ltd. in Cramlington(United Kingdom), which will support the manufacture of a new generation of decorative film products. Thanks to these capital investments we now have the necessary production technology in place to bring new product genera-tions to the stage of market maturity. Total investment spending in the yearunder review was down from the year-earlier level to total CHF 125 million.

Quality, Environmental Protection and Safety

Nearly all Forbo Group companies now satisfy the ISO 9001 quality standard.This reflects the great importance that the Group attaches to quality control at every level of business conduct and performance. In the year under review a number of Forbo companies were once again subjected to ISO 9001 re-examination.It is likewise Forbo policy to ensure that all manufacturing companies in the Group meet the criteria set out in the ISO standard 14001 on environmen-tal protection. The Dutch adhesives manufacturer Eurocol B. V. in Wormerveer(Netherlands) and Forbo Werke GmbH in Paderborn (Germany) bothachieved ISO 14001 certification in the year under review, thereby taking thenumber of Forbo production facilities which have attained this objective to 12.

Environmentally Friendly Use of Resources

As a matter of high priority, all Forbo business units take a careful and envi-ronmentally responsible approach to the use of natural resources. In doing so,our aim is not merely to discharge our responsibilities toward the environ-ment; we also gain valuable knowledge and experience of measures to cutconsumption of resources and hence lower production costs. Our ‘ResourceManagement Reporting’ system is implemented throughout the Group.

Certification

Responsibilitytoward environment

Capital investments 1995– 1999

0 10 20 30 40 50 60 70 80 90


m CHF

49

81

80

57

61

Flooringm CHF

76

78

74

83

85

1999

1998

1997

1996

1995


Flooring


Group HQ


Formula for Success: Highly Committed People

The performance of the Forbo Group is largely shaped by the

7,000 people who work for us. Because of the need to achieve a

sustained increase in shareholder value, combined with stiff

global competition and the rapid spread of new technology, our

employees face increasingly heavy demands in terms of their

commitment, ability to learn and openness to change. Forbo has

a variety of programs in place that form a basis for successful

performance and exceptional motivation on the part of all the

company’s employees.

Forbo’s staff training program was continued and expanded throughout theGroup in 1999, offering a total of more than 1,900 hours of training to in-house course participants – this in addition to the external training courseswhich Forbo companies offer their employees.The Group’s focus on its core business activities, its earnings-driven approach,the shift of emphasis away from production towards marketing, the extraencouragement given to innovation and, last but not least, the clear commit-ment to enhancing enterprise value as the company’s overarching strategicobjective – all these factors call for fresh ways of thinking and imply a funda-mental change in the way Forbo employees are expected to work. This trans-formation requires both an understanding of the need for change and anopenness to new ways of doing things.

Change at Forbo

Breakdown of employees by division

1999

3,334

3,462

33

Change98/99 %

–1.1

2.5

–2.9

%

48.8

50.7

0.5

Breakdown of employees by geographic area

0 200 400 600 800 1000 1200 1400 1600

1999

1,560

1,311

1,168

649

550

486

205

900

Change98/99 %

–0.3

–2.6

3.2

–4.3

–0.9

0.6

4.1

9.0

%

22.8

19.2

17.1

9.5

8.1

7.1

3.0

13.2

Benelux

Germany

United Kingdom

Switzerland

Scandinavia

France

Rest of Europe

Rest of World



We intend to actively promote this process of change by means of a compre-hensive communications policy, a corresponding training program and thecreation of performance-based remuneration systems. At the same time we must systematically cultivate the next generation of managers and henceput in place a suitable group-wide staff development policy. The function of Corporate Human Resources was set up with the aim to implement theseinitiatives.In the year under review two conferences attended by managers from all thebusiness units were organized for the purpose of preparing and then present-ing the Group’s strategic renewal program. In mid-June some 150 Forbo man-agers gathered for the Group’s traditional annual conference, where the topicsincluded value-based company management, corporate culture and corporatechange, and e-commerce. The speakers were leading international figures fromboth the theoretical and practical spheres. In December, an information eventwas held in Zurich for senior management. At this gathering the company’sstrategic renewal initiative was presented and the plans to implement it wererounded out in the subsequent discussions. The main objective of both eventswas to get management actively involved in shaping the process of change andto ensure that the Group’s new strategy was communicated to the differentorganizational levels in all group companies in the most effective and appro-priate manner.

Forbo Trophy

In future, the Forbo Trophy will be awarded to promote the pursuit of ourshared objectives. It will be presented every year – commencing this year – tothe group company which achieved the most exceptional performance in theprevious year. In addition, each year six employees or teams will be awardedmedals for their outstanding contributions to the Group.

Rewarding excep-tional achievements



W e c o m b i n e f u n c t i o n a l i t y w i t h s e c u r i t y .



The Forbo Share

With the adoption of its strategic renewal program, Forbo has

made a clear undertaking to manage the Group in the interests of

its shareholders and thus to attach the highest priority in all its

activities to maintaining and enhancing shareholder value.

Forbo pursues an open communications policy, which provides capital marketinvestors with regular, up-to-date information. In addition to the annual and interim business reports issued to shareholders, financial analysts and thefinancial press, Forbo cultivates contacts with its investors through presenta-tions and discussions.

The Forbo share price advanced in the year under review from CHF 600 toCHF 750. This 25% rise means that the Forbo share clearly outperformed theSwiss Performance Index (SPI), which gained 11.7% in the same period.The trading volume continued to be on a high level, which reflects not onlythe stock’s strong performance but also the increased level of investor interestin the Forbo share. The stock’s performance certainly also reflects the raisedexpectations amongst investors following the announcement of the Group’snew strategic thrust to the business world on December 7, 1999.

At the end of December 1999 2,563 shareholders were registered in the ForboHolding SA share register. To the company’s best knowledge, no shareholderowns more than 5% of the voting rights. In accordance with the Articles of Association of Forbo Holding SA, no single shareholder is allowed to votefor more than 8% of all voting rights.

General Meeting of Shareholders: May 3, 2000Autumn press conference: November 7, 2000Financial analysts’ meeting: November 7, 2000

Investor Relations

Share priceperformance

Profile ofshareholders

Diary dates

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

CHF SPI

Forbo share price and SPI performance 1999

800 5,500

750 5,250

700 5,000

650 4,750

600 4,500

550 4,250

SPI Swiss Performance Index



1995

Number

1,465,800

10,907

46,134

CHF

75,596,700

73,290,000

2,306,700

CHF

467

109

38

19

4.3

3.1

50

CHF

610

443

894

649

723

1996

Number

1,465,800

9,127

46,134

CHF

75,596,700

73,290,000

2,306,700

CHF

522

116

42

19

4.1

3.5

46

CHF

550

462

806

677

792

1997

Number

1,473,416

9,247

40,134

CHF

75,677,500

73,670,800

2,006,700

CHF

517

119

42

19

3.7

2.9

45

CHF

654

514

959

753

880

1998

Number

1,473,416

18,592

40,134

CHF

75,677,500

73,670,800

2,006,700

CHF

542

121

52

22

5.1

2.4

42

CHF

900

435

1,326

641

884

1999

Number

1,473,416

9,894

40,134

CHF

75,677,500

73,670,800

2,006,700

CHF

539

130

58

22

3.9

2.9

38

CHF

764

569

1,126

838

1,105

High

Low

High

Low

High

Low

Year-end

Share capital

Issued registered shares in circulation (of CHF 50)

of which held by Forbo

Reserve shares (without voting and dividend rights)

Registered shares (of CHF 50)

Nominal capital

Total

of which issued and outstanding shares1)

of which issued and non-outstanding shares

Data per share

Shareholders’ equity Group

Cash flow Group

Consolidated profit before specific provisions1)

Gross dividend

Gross dividend return (%)

Payout ratio3) (%)

Stock market statistics

Share prices

Stock market capitalization (m)

2)

1) See also Financial Report, ‘Notes to the Consolidated Financial Statements’, page 8, ‘Earnings per share’, page 92) Proposal of the Board of Directors to the General Meeting of Shareholders3) Gross dividend as % of consolidated profit before specific provisions



W e g e t t h i n g s m o v i n g .



Corporate Bodies and Management Structure

Term of office expires

MitgliedCommitte

Chairman

Karl Janjöri CH-Herrliberg 2002

Vice-Chairman

Dr. Willy Kissling CH-Hurden 2002

Members

Dr. Anton H. Bucher CH-Küsnacht 2002

Peter van Duursen NL-Driebergen-Rijsenburg 2002

Dr. Ivo Gerster CH-Binningen 2000

Dr. Gerd Hofmeister D-Hanover 2002

Dr. Paul Tanos A-Wien 2003

Prof. Dr. iur. Rolf Watter CH-Zurich 2003

Secretary

Andreas P. Lerch CH-Hüntwangen

A: Audit and Finance CommitteeB: Corporate Development CommitteeC: Committee for Human Resources and Remuneration

Chairman

Werner Kummer Chief Executive Officer (CEO)

Deputy Chairman

Werner von Kuensberg Adhesives SBU

Members

Dr. Jan Lipton Belting SBU (as of 1. 4. 2000)

Drs. Antonie J. Pluijmert Cushion Vinyls SBU

Jan E. Sångberg Corporate Business Development (CBD)

Marien A. G. Weijenberg Linoleum SBU (as of 1. 1.2000)

Gerold A. Zenger Chief Financial Officer (CFO)

Board of Directors Forbo Holding SA

Group Executive Board

PricewaterhouseCoopers Ltd. Zurich

Group and Statutory Auditors

A B C



Organizational Structure (as per 1.1.2000)

Executive Board

Chief Executive Officer

Chief Financial Officer Corporate BusinessDevelopment

SBU Linoleum SBU Belting

SBU Cushion Vinyls SBU Adhesives

BU Carpets BU Coated Textiles

BU Extruded Profiles

BU Decorative Films

Flooring DivisionIndustry Specialties Division

SBU Strategic Business UnitBU Business Unit


Addresses

Forbo Holding SA

CH-8193 EglisauTel. +41 1 868 25 50Fax +41 1 868 25 51

Forbo International SA

CH-8193 EglisauTel. +41 1 868 25 25Fax +41 1 868 25 26

www.forbo.com

Investor Relations

Gerold A. Zenger (E-Mail: [email protected])

Corporate Communications

Ursula Leonhard (E-Mail: [email protected])



Annual Report 1 9 9 9

Fo

rbo

An

nu

al

Re

po

rt 1

99

9

In the development and manufacture of its products Forbofocuses on the needs and wishes of its customers and end-users.The diversity of these needs is matched only by the uniqueness of the solutions Forbo provides – products that are designed to meet a broad range of exacting requirements in a variety ofsectors around the world. The pictures in this Annual Reportshow just some of the ways in which Forbo products are used,giving the reader a brief but representative impression of thebroad spectrum of products the company offers.

With the modern Novilon® floorcovering there are almost nolimits to individual choice. In the kitchen-cum-living area of a new single-family home in Frankfurt am Main Novilux®

marquetry borders add a special note.

Amsterdam’s former planetarium today serves as a conferencecenter and meeting place for architects. It was designed by thearchitects Van den Oever, Zaaijer, Roodbeen & Partners. P. Zeegerswas responsible for the original design of the Linoleum floor using Artoleum® Scala.

Siegling’s Transilon® conveyor belts transport the luggage atHong Kong’s new Chek Lap Kok airport where they demonstratethe robustness and hardwearing qualities for which they arerenowned.

Marmoleum® Real was used for the floor of the sports centerPabellon Deportivo Colegio Manuel Peleteiro in Santiago deCompostela in Spain – an ideal and attractive choice.

The wooden elements of the new bridge in the Sihltal valley near Zurich, Switzerland, were glued together with Forbo CTU’s weatherproof polyurethane wood adhesive Balcaton®.

At the Lance factory in Charlotte (USA) Transilon® conveyor beltsby Siegling are used for the processing and packaging of cookiesand crackers.

Forbo Creates Value for Customers

Page 8

Page 14

Page 18

Page 22

Page 28

Page 32

The original language version of this Annual Report is German.

ImprintConcept/Editing: Rubeli Häusermann Public Relations, ZurichDesign: Gottschalk+Ash Int’lPhotography: Daniel Gerber, ZurichTypesetting/Lithography/Printing: Neidhart + Schön AG, Zurich

March 2000

23777_GB_Forbo_UG_E 21.3.2000 9:03 Uhr Seite 1

23777 gb forbo in e 21.3.2000 9:06 uhr seite 1 · profit, taking it to a total ofchf 86.1 million...

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